IMF Warns These 4 European Nations Are "Potentially Destabilizing" To Global Economy

Europe is recovering, right? Wrong. As Nigel Farage raged last night, things are not what they seem and even the IMF is now beginning to get concerned again (especially after Lagarde's call yesterday for moar from Draghi and every other central banker). As Bloomberg's Niraj Shah notes, it's not just the PIIGS we have to worry about (or not), Denmark, Finland, Norway and Poland have been added to the IMF’s list of countries with the potential to destabilize the global economy.

Via Bloomberg's Niraj Shah ( @economistniraj ),

The IMF's decision means the four nations will be subject to mandatory financial sector assessments. The total number of countries on the list has risen to 29 from 25. The IMF’s decision may further undermine the safe-haven status of the Nordic nations, where rising household debt imposes a financial risk.

Finland’s debt-to-GDP ratio will almost double to 60.5 percent by 2015 from 33.9 percent in 2008, the IMF forecasts. The fund estimates the Finnish economy shrank 0.65 percent last year. Polish government debt reached 57.6 percent of GDP last year. A clause in the country’s constitution states that breaching a 55 percent ceiling triggers mandatory austerity measures.

Competitiveness at Risk

Denmark has dropped to 15th place in the World Economic Forum’s global competitiveness report from third in 2008. Labor costs rose 9.1 percent between 2008 and 2012, compared with an EU average increase of 8.6 percent in the period. Norway has the highest labor costs in Europe at 48.3 euros per hour in 2012, compared with 30.4 euros in Germany. That may undermine competitiveness and the growth outlook.

Most Financially Interconnected Countries

The inclusion of three Nordic nations for mandatory assessment is the result of a new methodology by the IMF that gives more weight to financial interconnectedness. The U.K. is the most financially linked nation in the world, followed by Germany. Seven of the top 10 most interconnected financial nations are in the euro-area.

So as the world congratulates itself (most notably Ben Bernanke today), the IMF seems concerned that this could all get worse again very quickly. Think they are all too small to worry about? Remember Lehman?

They have a $1 trillion sovereign wealth fund (enough for everyone to take a 2 year holiday!!) and operate an ongoing budget surplus (saving even more money).

Thanks to the fact they have had a positive trade balance for the past 30 years.

If personal income in Norway is $50,000 then personal debt is $100,000 which means across the country the people owe $500bn. So their government could bail out every single loan in the whole country twice over and still not need to borrow 1 dime in the bond market. Yet the IMF consider this risky??

Show me another country on the planet that can bail out their entire economy twice over, using actual savings.

Clearly the IMF have completely forgotten what savings are (and simply do not recognize them even when you have $1trillion saved up), such are their rarity in today's modern economies.

The Central Banks are at the end of their rope when in comes to "sustaining" the economy. They blew their stack and accumulated huge balance sheets (i.e. debt) just to keep things from evolving the natural way (economic crisis followed by auto-correction and purging of the accumulated financial garbage).

It doesn't matter how coordinated they are. All they can do is print fiat money and create more debt. As debt cannot increase to infinity (because debt obligations become increasingly hard to meet), the moment the great debt repudiation begins in the Western world, inflation will become high enough (and all too visible for every moron to see and feel) to destroy what's left of the real economy together with peoples lives. That's because, while debt can be cancelled, the money issued based on that debt cannot dissapear so easily (unless you start cancelling somebody's accounts...). Hence all the (true) talk about future record high prices for precious metals, on ZH but not only. History will repeat again, as it did so many times before, and in the process it will destroy all the human lemmings who thougt that "this time IS different because... well, just because we are so fucking smart compared with all previous generations !"

The collapse is very real, predictible, and visible for every human being with at least half functional brain and a minimum of education in economics and history. To pretend otherwise is to be either incredibly stupid (in which case you deserve to dissapear in accordance with the laws of natural selection), or incredibly corrupt (a troll shilling for the current system, in which case society should eliminate you as part of the self-cleansing process which precedes any recovery). Either way, you're a waste of time...

Central bank stimulus is a zero sum game. Initially, there is a positive as interest rates decline but over time the low interest rates hurt consumption as interest income drop for consumers and companies. After 5 years of ZIRP the other costly side of QE is obvious. Central banks are boxed into a corner as they can't allow rates to increase which would trigger a deflationary slide in housing and stocks. Job creation is a crap and will likely get worse. The fun part of QE is over now comes the cost.

Glenn Beck is digging up the mystery of German Gold repatriation. With the reports that even small amount of the delivered Gold so far was melted beforehand we can be sure that there is no more original German Gold left. As we have discussed before, theGold smashing down has started with Venezuela's request for Gold to be returned back and last year Gold's bloodbath was assured with Germany seeking for its Gold to be returned as well.

The IMF has no credibility at all. The 800 pound out of control Gorilla in the room is the dollar based system itself. Flashing a warning about Finland, Denmark, etc, etc. is absurd on the face. It is like looking at a class room full of kids and finding the smallest and most docile children and claiming that they will be the catalyst for a food fight come lunch time.

Off topic...BUT when have you ever seen GE with a bad number...INTC with revenue miss..UPS with a blow-up AAPL not selling phones in China....this is the core of America business...yet the stock market is up.....NUTS just NUTS

Remeber Lehman??? You are 1 of the smartest dudes on the waves today..you know better. 1st of all, you think anybody cares what the IMF has to say?? (answer: NO, gutless, powerless institution) 2nd of all, if we have learned ANYTHING over the last 5 yrs, it's that bad news sends asset prices higher! Nobody gives a crap about global economic horror stories. In fact, they are used to build the famed "Wall Of Worry" that "Bull Markets Must Climb". Please, the day the market actually cares about bad news is the day there is something to be gained by banksters being short. Till then, BTFATH.

Add in Puerto Rico to the chaos mix.....they will send a shockwave thru the system as they default...there is just way to much debt...and not enough income to pay for it....a politician loves to build a monument today and have someone else pay for it later.....or give additional benefits today..and pay for those later....problem is the later never comes with excess cash...

How can there be any instability in a supposed "stable" system? What underbelly of discourse is missing to complete the circle of information? I feel if that part of the information were to be accurate and available to us we would know more indeed...

Until then the model cannot be two states at once unless we are thru to "quantum finance" without prior notice we all were to move to the new standards.....regulation compliance its all we have now econ theory and best practices have expired....imhbo

Seems to me like the IMF is full of crap. How is a debt-to-GDP of 60% a problem for Finland, or the world economy? Sure, the Eurozone rules state that it's the limit for member nations, but when the EU average is 85% it's not like anyone actually follows the rules. Private debt is relatively low, so that's a nonissue as well. Norwegian private debt is not an issue either, sure we might see a bubble burst soon but will it have a global impact? I'm not sure if it will even have much of a local impact. Norway is the richest nation in the world.

I'd say that Danish debt is the only real problem, and their problems might become a problem for rest of the Nordic countries thanks to the interconnected banking in the area.

Norway? Hah funny how the IMF fails to mention the multibillion dollar wealth fund they have that continues to grow and fuel their economy. Norway is hardly going to destabilize the world economy. Their mixed economy is brilliant. 70% of their natural resources are owned by the people and it's those revenues which in turn have built their 300+ billion sovereign wealth fund. The other 30% of resources are owned privately. This and the Average Norwegian has a far superior intellect than the average American. Drive through Norway. You won't see shitholes like Detroit, East St. Louis, Watts/Compton.

Here in Finland it's common fun to have been enjoying low rates. So thanks Spain and Greece, without them mortgage rates would be much higher. One Finnish banker told that times are really easy for Finnish households, these are "kissan päivät" (the life of Riley) and they could easily take more debt because amount of debt per household is not yet so high like in Denmark or Sweden.

You treat financial "contagions" the same way you treat a biological one: QUARANTINE, MFers.

They need LESS coupling, not more. They merely need interface protocols and a mechanism for their financial transactions, not the same "bug-infested Operating System".

But let's not confuse the "reason" with the "pretext": What the Anglo-American-Israeli alliance wants, is a One-World Financial Regime, with them holding the reins and calling the shots. And the US MIC doing all the heavy 'lifting', i.e. Enforcement, with the Old Guard in the Shadows of Power.

The world is still being fooled by them, but less so every day. Spread the word.

"Stay with the trend because the markets ARE going higher in 2014. Take into account also the fact that this is an Election year - the Gov will not tolerate anything more than a 3-5% pullbck in stocks."